Will My Traditional IRA Be Protected If I File for Chapter 7 Bankruptcy?
If you are considering a Chapter 7 bankruptcy filing in South Florida, either as an individual or jointly with your spouse, it is important to talk with a lawyer in detail about the bankruptcy exemptions that will be relevant to your case. Specifically, if you have a traditional individual retirement account (IRA) or any other type of retirement accounts or pensions, you will want to determine whether these are fully exempt in a Chapter 7 case. For most filers in Florida, traditional IRAs and other retirement benefits will be fully exempt, but you should be certain that you understand the applicability of the exemptions to your specific case before you file. Consider the following information.
What is a Traditional IRA?
A traditional IRA, unlike a Roth IRA, allows earners at any level to contribute to their account, with a maximum amount each year. In 2026, earners under age 50 can contribute up to $7,500 while earners age 50 and older can contribute up to $8,600.
Withdrawals made from a traditional IRA are taxed as income at any point of withdrawal but are penalty free after retirement age.
Can I Anticipate That My Traditional IRA Funds Will Be Exempt in My Chapter 7 Bankruptcy Case?
As long as you are filing for bankruptcy in Florida and you meet the residency requirements to file for bankruptcy in Florida, then Florida’s bankruptcy exemptions under Chapter 222 of the Florida Statutes will be the exemptions available to you. For purposes of exempting retirement assets, Florida’s exemptions are beneficial to debtors because they allow you to exempt all of the money you have held in a traditional IRA or another type of IRA, as well as in other retirement accounts.
To file for bankruptcy in Florida, you are only required to have lived in the state for a total of 180 days. However, in order to be eligible for Florida’s bankruptcy exemptions, you must have lived in Florida for at least 730 days prior to filing for bankruptcy. Otherwise, you will likely need to use either the exemptions of your previous state of residence or federal exemptions. You should be aware that, if you cannot use Florida’s exemptions, traditional IRA exemptions may be capped at a particular amount and you may not be able to exempt all of the money (though you will be able to exempt a significant amount) held in your traditional IRA.
Contact Our West Palm Beach Bankruptcy Lawyers for Assistance with Your Chapter 7 Bankruptcy and Exempting Your Traditional IRA Funds
If you are currently considering a Chapter 7 bankruptcy filing and you have retirement money saved in a traditional IRA, it is important to discuss specifics about your account and any other benefits you will be seeking to exempt in your bankruptcy case with one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan Delaney & Eller, PLLC. As we discussed above, retirement accounts are often exempt in full, but there are limits, depending on how much money you have set aside in a traditional IRA and other types of retirement accounts that you may have. To learn more, and to find out specifically about exempting assets in your traditional IRA when you file for bankruptcy, contact our firm for assistance.
Sources:
irs.gov/retirement-plans/traditional-iras
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222.html
